Stribog Ltd v Fki Engineering Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mummery,Lord Justice Rix,Lord Justice Wilson |
| Judgment Date | 25 May 2011 |
| Neutral Citation | [2011] EWCA Civ 622 |
| Docket Number | Case No: A3/2010/1429 |
| Court | Court of Appeal (Civil Division) |
| Date | 25 May 2011 |
[2011] EWCA Civ 622
Lord Justice Mummery
Lord Justice Rix
and
Lord Justice Wilson
Case No: A3/2010/1429
IN COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HON MR JUSTICE BURTON
Case No: 2010 FOLIO 61
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Barry Isaacs QC (instructed by Olswang LLP) for the Appellant
Mr Mark Templeman QC and Ms Emily Wood (instructed by Davis & Co) for the Respondent
Hearing date: 22 nd February 2011
The issues
The issues in this appeal are (a) whether the English courts can stay these proceedings, and (b) if so, whether they should stay them.
The ground on which a stay is sought from the English courts is that "related actions" within the meaning of Article 28 in Section 9 (" Lis pendens-related actions") of Council Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the Judgments Regulation) are pending in the courts of two Member States: one action in Germany in the Landgericht Lübeck (the German Action) and the other action in the United Kingdom in the English Commercial Court (the English Action).
Under Article 28 there is discretion to stay a related action that is pending:-
"1. Where related actions are pending in the courts of different Member States, any court other than the court first seised may stay its proceedings."
Under Article 30 a court shall be deemed to be seised for the purposes of Section 9:-
"1. at the time when the document instituting the proceedings or an equivalent document is lodged with the court, provided that the plaintiff has not subsequently failed to take the steps he was required to take to have service effected on the defendant or
2. [not applicable]"
That Article filled a gap in the Brussels Convention, in order to reconcile the various procedural systems, by defining the date on which an action is "pending" for the purposes of Articles 27 and 28
Under Article 27, which was relied on at first instance but is not pursued on appeal, a stay of pending proceedings is mandatory in specified circumstances:-
"1. Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established.
2. Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court."
On 21 May 2010 Burton J dismissed an application for a stay of these proceedings. The application was made by the claimant in the German Action, Stribog Limited, which was the first of the parties to institute proceedings against the other. (Stribog was formerly called DeWind Limited and was referred to as DWL in the judgment of Burton J.)
The English Action, in which Stribog is defendant, was instituted second in time. Burton J held that he had no discretion to grant the stay sought by Stribog, as, in his view, the English Court was the court "first seised" within the meaning of Article 28.1.
On Stribog's appeal against the decision of Burton J there is some common ground:-
(1) The German Court is seised of the German Action. It was instituted by Stribog on 18 September 2009 against FKI Limited and its subsidiary FKI Engineering Limited (together FKI). They are the claimants in the English Action and the respondents to this appeal.
(2) The English Court is seised of the English Action. It was instituted by FKI against Stribog on 21 January 2010.
(3) As at 15 February 2010, when Stribog issued its application for the stay of the English Action, and at the date of the hearing before Burton J, "related actions" were pending in the courts of England and Germany.
(4) If the English Court is "first seised", it has no power to stay the English Action.
(5) If the German Court is "first seised", the English Court has a discretion to grant a stay of the English Action.
The particular area of dispute in this case arises from FKI's contention that the two actions were not "related actions" at the date when the English Action was instituted. The German Action and the English Action only became related actions when, subsequently, Stribog introduced a new issue in its German Action.
Chronologically the German Court is the court first seised of legal proceedings between these parties. Stribog relies on that fact as giving the English Court jurisdiction to stay this related action.
FKI's position is that, after the English Action was instituted, Stribog introduced into the German Action, by a process equivalent to amendment of its case, a new issue. It related to an Assignment Agreement governed by German Law and pleaded by FKI in the English Action. FKI say that Burton J was right to conclude that, in those circumstances, the English court was "first seised" within the meaning of Article 28.1. Burton J held that where a first action, which is not related to a second action when the second action is instituted, is subsequently altered or amended, the court of the second action is the court first seised for the purposes of Article 28.1: see paragraph 39 of his judgment [2010] EWHC 1160 (Comm). Stribog contends that there is no such rule or principle and that the judge's reasoning is contrary to the language and the purpose of Article 28.1.
Authorities on various aspects of the interpretation and operation of Articles 27 to 30 of the Judgments Regulation were cited to Burton J and to this court. None of them is directly on the point of the interpretation of Article 28.1, read in conjunction with Article 30, and the application of those Articles to the particular facts. The cases cited were Grupo Torras SA & Anor v Sheikh Fahad Mohammed Al-Sabah & Ors [1996] 1 Lloyd's Law Rep 7; The "Happy Fellow" [1998] 1 Lloyd's Law Rep 13; Underwriting Members of Lloyd's Syndicate 980 and others v Sinco SA [2009] 1 All ER (Comm) 272; and Nordea Bank ASA & Ano v Unicredit Corporate Banking SpA & Anor [2011] EWHC (Comm) 30.
The appeal
By his order dated 21 May 2010 Burton J dismissed Stribog's stay application. The ground of the application was that a related action (the German Action) between the same parties had already been brought by it in the Landgericht Lübeck, which was accordingly first seised. Burton J disagreed, holding that the English Court was first seised.
He refused permission to appeal, as did Sir Richard Buxton on 22 June 2010. Moore-Bick LJ granted permission to appeal at the hearing of a renewed application on 6 October 2010.
More facts
In July 2005 the claimant FKI Engineering Limited, a UK company wholly owned by FKI Limited and involved in the wind power generation business, sold its shares in a German company, DeWind Gmbh, to an English company now called DeWind Holdings.
In August 2005 DeWind Gmbh agreed to sell its business assets to Stribog. The sum of 33m euros is still outstanding as the purchase price due under a Business Transfer Agreement (BTA) between those parties dated 1 August 2005. It is expressly governed by English law and contains a clause which, in an eccentric excess of particularity, names Milton Keynes as the exclusive place of jurisdiction.
On 29 August 2008 insolvency proceedings in relation to DeWind Gmbh began in the Lübeck local court. On 9 October 2008 Dr Klaus Pannen was appointed as insolvency administrator. On 31 August 2009 the administrator purported to assign, by an Assignment Agreement to FKI, various claims by DeWind Gmbh against various parties. Claims against Stribog were included. Clause 6 provided that the Assignment Agreement was to be governed and construed in accordance with German law and that the sole venue for disputes should be Hamburg.
The question of the validity of the Assignment Agreement was not raised by Stribog in the German Action instituted in Lübeck on 18 September 2009. Stribog's claim was for a declaration of non-liability to FKI for any claims or rights, with the exception of any potential purchase rights or claims plus interest under the BTA. The Particulars of Claim in the German Action referred to FKI's wrongful assertions that they had rights against Stribog. On 9 October Stribog submitted to the German Court a statement making it clear that purchase price claims on the part of FKI arising from the BTA were not included. Reference was made to the Assignment Agreement to FKI by the insolvency administrator of the alleged claims of DeWind Gmbh.
On 21 January 2010, FKI started the English Action in the Commercial Court against Stribog. It was said to be brought by FKI as assignees of DeWind Gmbh pursuant to the Assignment Agreement for Stribog's breach of the BTA and seeking payment of the balance of the purchase price under the BTA; alternatively, damages for its breach and interest.
At that point Stribog had not raised any issue in the German Action about the Assignment Agreement being void under German Law. (It has yet to serve its defence in the English Action. FKI have served their defence in the German Action). It is said by FKI that Stribog first raised the issue of invalidity in a further voluntary statement sent by its Hamburg lawyers to the court in Lübeck on 12 February 2010. The statement was by way of further information rather than by a formal modification of the proceedings, though equivalent to an amendment in that it raised an issue. It asserted that FKI are not entitled to any rights or claims against Stribog arising from the Assignment Agreement, because it was void under German law. It failed to...
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